Real Estate Went for 39oz Silver in Weimar Why It Will Happen Again Hyperinflation Mechanics | Rafi Farber

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Summary

➡ Rafi Farber in this article discusses two main topics: the possibility of buying real estate at low prices during hyperinflation, and the risky practice of basis trading in the treasury futures market. The author explains how during hyperinflation, property prices can drop drastically, using the example of buying a house in Berlin for 39 ounces of silver in 1923. The second part of the article focuses on basis trading, where traders sell a futures contract for a treasury note at a higher price, then buy the actual treasury note at a lower price, profiting from the difference. However, this practice can lead to financial instability and potential crises, as seen during the COVID lockdowns and in 2019 when treasury rates spiked overnight.

Transcript

Law the bomb, Harry! We’re with ya! You gotta get that shuttle started. You gotta fire it up now! Dammit, Shaq! Get off this rock! Hey guys, Raf here from The Endgame Investor and today we’re gonna talk about two different things. One is why there’s always a housing collapse. Why it is possible in the event of hyperinflation to buy real estate for such cheap prices and I’ll show you an example. I talked about 75 ounces of silver for a swanky house in Berlin in the past and that is documented by I can show you something even more extreme and that is 39 ounces of silver for real estate in Germany in 1923.

Why is it from a back-end perspective that this happens? I’m gonna try to show you the mechanics of it with a little note I made in the diary of the Great Depression by Benjamin Roth and also there is something going on in five-year treasury notes. There’s a lot of free money going on in five-year treasury futures. I talked about the basis trade in a previous video. I will put a card up to that thing over here so you can see what the basis trade is. Basically what it is is that traders go into the futures market, sell a futures for a treasury note short, and then buy the treasury note itself on the spot market and they profit from the difference in the futures price from the spot price.

So if there’s a spread between the two, they sell the futures short for the higher price, they buy the treasury note itself on the spot market and they pocket the difference. And how so they have to multiply this trade many many times over borrowing money in the repo market at about 5.3% or whatever the repo rate is. The beauty of this is it’s free money. That is until the dollars in the repo market run out and then they cannot cover their trades and they have to close them at market for whoever will buy the futures contracts from them and they could lose a lot of money and you can have a lot of weird crap happening in the notes in the bond market because of this basis trade.

This is exactly what happened during the COVID lockdowns when the markets shut down. It is what happened in 2019 which drove treasury rates and overnight interest rates up to 10% overnight. And it’s going to happen again because the dollars are running out because QT quantitative tightening continues and that means the monetary base is shrinking but the volume in the repo market keeps growing and I will show you all these charts in a second. There’s something specific going on in five year notes that is driving the system to new extremes and that is going to blow up at some point soon.

And I can’t tell you when I’m sorry. I just see the numbers. I know how to count and the numbers do not work out and there is a wall at some point and when it is hit there’s going to be some form of crisis in the notes market in the treasury notes market and it’s going to mess with interest rates and the Fed is going to have to intervene. And so folks here is what I found and then we’ll go into housing and 39 ounces of silver for a house in Berlin and why.

Okay folks you can see here this is the two year treasury note and pay attention to the blue line. The blue line is leveraged funds. These are the hedge funds that profit from the basis trade. They sell future short and they buy the spot. They do it to pocket the difference. And so here we have a near record amount of shorts in the two year note futures at 1.8 million contracts.

Now back here where my mouse is right now November December 2023 the mainstream media was freaking out about the basis trade because we had made a new record high in short positions and the short position is a proxy for the basis trade in this particular security. Which went above the 2019 record short position which was the basis trade back here which was part of the cause of the repocalypse when repo rates went to 10% because hedge funds needed money to cover these trades but there weren’t enough dollars and so market overnight rates went to 10% and the Fed intervened and quantitative easing began again.

They were freaking out about the basis trade over here, and they said it wasn’t going to get any worse. It got a little bit better over here. The short positions shrunk a little bit to 1.426 million, but now they’re back to a near record high, but not quite a record high.

Here, I’m going to go to the next tab, and that is this. This is the two-year note futures. This is the spread between the spot contract, which is June 2024. It is now June 2024, therefore it is spot. The price on that is $101.21. The price on the futures is $101.29. The difference between that is eight cents.

So if you sell futures short September 24, and you buy the spot, you are pocketing eight cents per contract. Then you go in, borrow from the repo market, and magnify that trade over and over and over again. Then you start to get some real profits. That’s the two-year, but it’s seven cents. That’s a good number, but it’s not huge.

Let’s go to the next security we have here, the ten-year note. This is the ten-year Treasury. We see here another record low or record high in shorts. Shorts are low because they’re negative, you’re selling short. The record high in short positions was about 1.671 million. Now it is 1.248 million, slightly less bad than it was.

But here again is the repocalypse, when we had a record amount in this basis trade. We are still above that record, even though we have gone down in shorts relatively since February 2024. Yeah, they were freaking out about the basis trade back here. It got worse over here. Now it’s getting better in the ten-year specifically.

We can see in the ten-year chart here on settlements. We have the settlement price over here. We’re amassing around $109.10 versus the settlement for spot price, which is $109.01.5. The difference on that is eight and a half cents, slightly better than seven cents or eight cents, or whatever it was in the last one.

But not spectacular. You have to use the repo market again to keep funding these trades and multiply that eight cents over and over and over again until you get some real profits. It’s very dangerous because something can crash. Now we’re going to go to the kicker here. That is, something is going on in the five-year Treasury note.

This is extreme. Okay, so the five-year Treasury note not really participating in the short position in the basis trade back in 2018, 2019. The repocalypse is over here, September 2019, where I’m mousing around. We did have a record short position, but it wasn’t that much compared to what it is now. We’ll get to that in a second.

So you could say this was participating in the basis trade also, but to a minor extent. But look at this. Now we have a crazy amount of short positions in the five-year note specifically, 2.719 million contracts short. I figured out why this is. Why are short contracts in the five-year note specifically, why are there a crazy amount of shorts?

Unprecedented from about 370,000 contracts short over here in July 2022, two years later, June 2024, we are at 2.719 million contracts short. It just gets more extreme. Well, that is because of this. We have here the difference between the futures settlement price for September for five-year notes and the June 2024 spot price.

That’s $106.32 for the futures versus $105.23.7. What is that? That’s like a 76 cents spread every time you sell a futures contract at $106.32 and you buy the June 2024 spot note contract or spot note or whatever it is, the cash bonds, you have $105.23.7. Seventy-six cents you pocket every time you do this.

So that’s the one you want to multiply, and I don’t know why this spread exists. I’m going to do some research to try to figure it out. But 76 cents multiplied in the repo market, and what the hell is going on in the repo market? We see that volume in the repo market has been going up and up and up since 2022 when the basis trade began to accelerate in the five-year note category.

So we’ve gone from about less than a trillion dollars a night to now two trillion dollars a night, and it keeps going higher and higher and higher. Why is that a problem? Well, it’s a problem because the monetary base is shrinking. This is a proxy for the amount of dollars available in the repo market overnight.

The more this goes down, the more it shrinks, the fewer dollars are available. Dollars is a countdown. This was the repocalypse. We had QT from 2017 to 2019. Repocalypse dollars ran out, repo market couldn’t be funded, and all of a sudden, wham, you have quantitative easing again. Balance sheet goes up.

This is the Fed balance sheet, of course, and then you have woke COVID lockdowns craziness. Now we’re funding two trillion dollars a night on a monetary base of $7.255 trillion. There is a wall here somewhere, and it’s going to be hit. When it does, we’re going to see this from 2019, except a lot more extreme.

Closer to something like this, and from there, I believe we will head to the endgame in a beeline, and it shouldn’t take many more months from that point. What about housing, and why does it collapse so spectacularly in hyperinflation versus other real assets? I’m saying housing is going to be worthless. I’m saying the price of housing is going to fall spectacularly in terms of gold and silver.

Especially silver for a brief amount of time. You should be able to buy a house or any other real estate for a small pile, maybe even a handful that you could with difficulty hold in your hand, for a house or a building. Why does that happen? Well, I will share with you this slide. This is from page 121 of “The Great Depression: A Diary,” written by Benjamin Roth, who lived in the 1930s through the Great Depression.

He passed away in 1978, and he’s talking about Roosevelt’s inauguration year and his inflationary plans. By inflation, he means the increase in the money supply. He’s using the old definition, the more accurate definition. Down here is my note, my handwriting. I do have handwriting in small letters, but it’s hard for me to read it, so I just use capital letters because even though I have bad handwriting, it’s more legible for myself in capital letters.

Yeah, I just do that for myself. Anyway, let’s read this paragraph. Inflation is a terrible thing, and I hope it will never come to America, he says. Yeah, it penalizes saving and changes the entire outlook of the prudent investor from government bonds, life insurance, to speculative stocks and commodities. Yes, we all know this. This is inflation 101.

The German mark before the war was worth almost 25 cents in American money. When inflation ended, meaning in 1923, he is talking about in Weimar, a dollar would buy about a billion marks. During inflation, this is from an article he read in the Saturday something post on the previous page of the book. It’s on page 120 if you want to look at it.

I couldn’t find that article. I could probably find it if I bought a subscription to that magazine. Anyway, so the highlight here is during inflation, during hyperinflation in Weimar, American speculators went into Germany and bought huge pieces of valuable real estate. He doesn’t specify exactly what for.

Some say as low as $50 in our money. $50 in our money meaning in the dollar is 20.67 cents per ounce of gold in 1923. That’s about 2.4 ounces of gold. The gold-silver ratio in that year was 16 to 1, and so that equals about 39 ounces of silver for a valuable piece of real estate in Germany in 1923. Hunger, starvation, and ruin were the results of German inflation, and no country has it ever proven to be a blessing.

This is July 1st, 1933. He was wary of Roosevelt’s inflationary plans, of which we are still in the same pyramid from back then. My note is why does this happen? Why does real estate fall so spectacularly relative to other goods and services in hyperinflation? The reason I wrote, if most of real estate is debt, right?

What makes real estate valuable? Why do prices keep going up? Because you can borrow and get a mortgage. The more you can borrow, the lower interest rates go, the more housing costs. But the value of that house is in your ability to service that debt because what the bank is really getting is your monthly payment of that mortgage. If the debt is worthless, if the mortgage is worthless because it cannot be paid, then the price of the housing must fall.

But think about this. What backs the dollar? A lot of it is mortgage-backed securities. Those same mortgages back the dollar because the Fed owns about 2.5, 2.4 trillion dollars, I think the number is, in mortgage-backed securities. In hyperinflation, what is happening is the debt that backs the dollar or whatever currency it might be, the debt that backs the currency is itself falling, which is US Treasuries.

Within that, the dollar itself is falling, and the Treasuries fall, the dollar itself falls. When you have a house whose value is inherent in the debt that is paid on the mortgage and the dollar itself falls plus the mortgage itself falls, you have a square, a multiplication effect, an exponential effect. When you square something, you multiply it by itself, the falling value of the mortgage debt within the falling value of the debt that backs the dollar.

So you have everything funneling itself, the purchasing power into gold and silver. That is why houses fall so spectacularly in terms of gold and silver because they are sold, bought, and sold in a currency based on debt. When within that indebtedness, the house itself, its value is based on the debt that you were paying on the mortgage.

So when both of those fall, it’s an exponential effect, and the price of the house falls spectacularly in gold and silver terms, especially in silver terms. When silver has to be used as a currency once again and falls from about 65, 70 to 1, where it is now, is it at 80 to 1, down to around 15 to 1, monetary panic ratio.

That’s why you can buy a house at the peak of hyperinflation for about 39 ounces of silver. I fully expect that will happen again at some point. When it does, that is the bell ringing. Get rid of your silver, buy stuff, and restart the monetary system. This is our big problem in the Russian.

If you enjoyed this video, then please consider signing up to be an endgame investor subscriber. The link is in the description below. You can do this for free. I make a good part of my articles, every one of them free, and occasionally I do put out a free one in full. I did that last week.

If you would like more religious lessons in gold and silver government, the last video I did for my Patreon subscribers and the founding members of the Substack, for which you will also get access to my religious playlist in gold and silver and government, the last video we did is why drafting people into the army is completely forbidden by biblical law.

Going into the army to fight a war, no matter what war, has to be voluntary. I prove that from biblical and rabbinic sources. This is Rafi the Endgame Investor wishing everyone a nice house for 13 ounces of silver if we merit to reach that day, which I think we will. Keep stacking, keep calm, and stay shiny.

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See more of Rafi Farber on their Public Channel and the MPN Rafi Farber channel.

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